Remarks of Assistant Secretary Victory at the GBDe Sherpa Meeting

Thank you for the invitation to speak to you today. GBDe is the leading private sector-led effort to address many of the critical issues that are central to the challenge of furthering e-commerce. We in government are well aware of your significant ground-breaking efforts and we look forward to working with you as you move forward with your collaborative work.

As the Administrator of the National Telecommunications and Information Administration (NTIA), I have spent a lot of time working with companies, such as yours, exploring how new technologies can better serve our nations. We know that new technologies are essential to economic growth, to our global competitiveness, and to our national security. IT products and IT-producing industries, for example, contributed to approximately two-thirds of the productivity growth in this country in the latter half of the 1990s and continued to sustain productivity growth even during the economic downturnin 2001.

And you can bet that future productivity and economic growth will also be driven by IT, particularly e-commerce. The challenge is making the right policy decisions to promote innovation and remove any unnecessary impediments to maximizing utilization of these new technologies. Over at my agency, NTIA, creating the right policy environment has been a main focus. And three of the major policy issues we have been working on of late could directly affect the future of e-commerce. These issues are broadband, spectrum management and ICANN reform. I thought I would update you today on where the Administration is on each of these key issues.

BROADBAND

One issue that has clearly captured our attention is broadband - a lightning fast means of data transmission that could revolutionize the way we all send and receive information. The wonder of the World Wide Web is its ability to link instantly everyone to everyone else - rendering distance irrelevant and access to information and ideas ubiquitous. The key, of course, is the deployment of high speed on-ramps and off-ramps to make our dreams a reality.

In addition to enhancing business efficiencies and broadening commercial opportunities, broadband holds the promise of expanding educational opportunities, improving health care, increasing governments' responsiveness to its citizens, and generally enhancing our global competitiveness. Thousands of new jobs could result from greater broadband deployment, both directly through network construction, and indirectly through industries related to advanced networks and services. Not surprisingly, then, broadband is an important potential source of growth and investment for our country and for others around the world.

But right now, only a small segment of the American population is enjoying the benefits of broadband. A recent report co-authored by NTIA and the Economic and Statistics Administration, entitled A Nation Online: How Americans Are Expanding Their Use of the Internet, found that 54% of Americans are currently using the Internet. However, of those, only roughly 20% have broadband access (that's only about 10% of the overall population). Clearly, that is not sufficient to realize broadband's full potential.

As President Bush emphasized just last month, "[t]his country must be aggressive about the expansion of broadband." And indeed, the Administration has been taking a number of steps to create incentives for investment, to stimulate demand and usage, and to remove unnecessary government impediments to competition and deployment. In order to create incentives to deployment, the Administration has:

extended the Internet tax moratorium;

successfully urged Congress to modify the tax depreciation schedules to allow companies to depreciate the capital costs associated with broadband roll-out over a shorter time period; and

extended the research and experimentation tax credit (and we continue to urge Congress to make it permanent).

The Administration has also taken steps to help promote demand for these exciting new services by:

making e-government a priority for all agencies, leveraging $52 billion in federal IT procurement to make government run more efficiently;

making broadband demand a priority of the President's Committee of Advisors on Science & Technology;

holding workshops on key demand issues, such as digital rights management and the benefits of broadband for small business; and

exploring ways to expand telework opportunities.

The Administration has also been working to identify and eliminate unnecessary government impediments to broadband competition and deployment. One issue where NTIA is taking the lead is on rights-of-way management. This is one issue where all sectors of the broadband industry - Bell Operating Companies, CLECs, cable providers, overbuilders, and wireless providers - actually share the same point-of-view. All participants are concerned that restrictions by certain municipalities and federal government landowners on accessing public rights-of-way and tower sites might be inhibiting or at least delaying broadband network construction. While the industry admits that the problems seem to lie with only a small number of jurisdictions, due to the nature of networks, a few bad actors can have a disproportionately adverse effect on the roll-out of national, statewide or regional advanced services networks. Conversely, public rights-of-way managers have also identified problems they maintain are created by some service providers.

To ensure that rights-of-way regulation is appropriate and not an impediment to broadband deployment, NTIA is working closely with the National Association of Regulatory Utility Commissioners (NARUC), and particularly its Rights-of-Way Study Committee, to help identify best practices and recommendations for state actions to streamline the current process. NTIA is also meeting with representatives of the cities and their associations, to identify means for improving and simplifying their current processes, while ensuring sufficient flexibility for municipalities to best serve their citizens. NTIA is also launching an initiative to streamline and improve the rights-of-way oversight practices of federal government agencies. We want to see the federal government be a leader on this issue.

Meanwhile, the FCC is moving on all fronts with proposals for broadband regulatory reform. The agency presently has opened three key proceedings that could dramatically change the broadband landscape:

Nondominance Proceeding. The first of these raises the question of whether telephone companies should be considered "dominant" in the provision of broadband services - right now most surveys indicate that cable companies have the lion's share of the broadband market. The answer to this question is important, because if the telephone companies are found to be nondominant, their broadband services will be exempt from a number of strict regulations and reporting requirements, including the filing of tariffs.

UNE Triennial Review Proceeding. The second FCC proceeding focuses upon the right mix of regulation and deregulation of the broadband wholesale market. To what extent should ILEC competitors have the right to demand and receive "pieces" of the ILEC's network at special discounted rates under TELRIC pricing? As you might anticipate, the ILECs are making their case for shortening the current list of network elements subject to unbundling, while the CLECs are arguing for maintaining or expanding the list.

Proceeding to Define ILEC Internet Access. The third FCC rulemaking is looking at the legal "definitional" status of ILEC broadband services. For example, is DSL a regulated telephone service under Title II of the Act? Or, is DSL an "information" service that falls within the less regulatory Title I of the Act? Just as importantly, the Commission is asking for industry views as to the practical consequences of classifying Internet access in one legal cubbyhole as opposed to the other.

The general betting line is that the FCC will be taking action in one or all of the broadband proceedings by the end of the year. As the agency moves ahead with its efforts, NTIA will be assessing when and where its views could contribute to a better outcome for competition, deregulation and the American consumer. But these benefits are by no means limited to our borders, and by their very nature can be increased by the use and spread of broadband around the world.

SPECTRUM

While, up to this point, broadband has been most often thought of as a wired technology, wireless broadband - and thus wireless e-commerce - seems destined to be a part of the future. Broadband services are beginning to be delivered via terrestrial wireless and satellite systems. Ad hoc services using 802.11 or WiFi technology are also proliferating. All of these innovative new services and technologies require spectrum for delivery. A pressing challenge for those of us who manage spectrum is ensuring that adequate frequencies are available to fuel future wireless growth (including for broadband services), as well as to provide the increasingly indispensable infrastructure for our military, law enforcement and public safety needs.

We at NTIA have been trying to look at long term policy and process shifts to better accommodate the dynamic nature of wireless technologies and wireless needs. Toward that end, in early April I hosted a two-day Spectrum Summit with joint participation by Chairman Powell and his FCC colleagues. Our objective was to hear from the experts as to the successes and failures of current spectrum management policies, as well as how to further improve the process.

The results of the Spectrum Summit were very revealing. Among the major problems identified with the current process were:

Gaps in governmental coordination between the three responsible U.S. agencies - NTIA, FCC and the State Department;

Length and complexity of the allocation process;

Inefficient uses of spectrum and the absence of efficiency stimulating incentives;

Challenges in making "room" or "home" for new services and technologies; and

Lack of clarity about spectrum rights and the federal spectrum management process.

From the Summit, I believe several basic spectrum management goals emerged:

First, the U.S. Government agencies involved in spectrum management - NTIA, FCC and the State Department - must work collaboratively as "one spectrum team" to serve our nation's collective interest. Chairman Powell and I have taken the first steps to improve our interagency communications and to take a more forward-looking approach to accommodate advances in technology within our domestic spectrum. Chairman Powell, Deputy Assistant Secretary Gross, and I have also been discussing how we can better coordinate to improve our international outreach as we prepare for international fora, like theWorld Radiocommunication Conferences held every three years.

Secondly, we should develop policies that encourage spectrum efficiency. NTIA has long advocated and required the use of spectrum efficient technologies by Federal agencies. For example, NTIA has developed, and the Federal agencies are now implementing, a transition to narrowband technology to relieve the congestion in the land mobile radio bands used by the Government. NTIA and the Federal public safety agencies have also adopted technical standards for receivers to minimize interference and increase overall spectrum efficiency. We are also exploring innovative new technologies, including those that will permit radios to select their operating frequencies, decrease power, and adjust coverage, based on sensing the operating environment and dynamically selecting unused channels.

Third, we must establish forward-looking policies that enable technological advances and eliminate legacy regulations that stand in the way of innovation. One such promising reform in this area is the FCC's proceeding on creating secondary markets that would permit parties to "lease" their spectrum to others, to put otherwise unused spectrum to its most efficient use. Another is the accommodation of frequency flexible wireless systems, such as those under the 802.11 standard, on an unlicensed basis. Taking steps to make room for new technologies is key, including through migration or relocation to higher frequency bands. NTIA recently published rules for Federal agencies to be reimbursed by the private sector for relocation costs, and is currently working on a legislative proposal (referenced in the President's 2003 budget) to create a reimbursement fund from spectrum auction proceeds.

And fourth, we should ensure that we have policies that assure the deployment of robust wireless networks that are prepared for the worst of crises and able to deliver the very best of services to the American people. The events of September 11, 2001, demonstrated how critically important communications capabilities are for our nation's first-responders. Interoperability among these agencies is essential to their ultimate success. NTIA is attempting to assist in achieving this goal through research at our Boulder, Colorado lab, and through education and outreach. Last month, NTIA and the Public Safety Wireless Network Program co-hosted a summit here in Washington to focus on current and emerging solutions for achieving interoperability.

While we wrestle with building a sound spectrum management framework for the future, the demands of the present increase unabated. The search for new homes for new services - whether new allocations, relocation of incumbents, or advanced sharing techniques - involve inherently nettlesome issues. Let me identify several of the key challenges that are facing all of us involved in spectrum decision-making:

Third Generation Wireless (3G). Since 2000, NTIA, the FCC and the Federal agencies have been working cooperatively to take certain actions to identify spectrum for 3G services. After extensive public outreach and work with industry and affected agencies on technical analyses of the various band options, NTIA and the Federal agencies are now focusing specifically on the 1710-1770 MHz band, while the FCC is focusing on the 2110-2170 MHz band. A viability assessment on making both of these bands available for 3G is scheduled for release shortly.

700 MHz Band. The Administration welcomed Congress' action last month to facilitate the postponement of the auction of most of the spectrum in the 700 MHz band. This affords time for the FCC to develop the policies necessary to ensure certainty as to when and how this spectrum will become available for new wireless service. The Administration recognizes the important role that broadcasting continues to play in the lives of all Americans and the challenges associated with the conversion to digital broadcasting. Yet, at the same time, spectrum is needed for new wireless services that provide new communications opportunities. We are searching for an equitable and efficient solution for relocating incumbents in these bands.

Solving these thorny spectrum issues - both in the short term and the long term - will be key to maximizing spectrum use and thus realizing the full potential for new technologies such as wireless broadband and wireless e-commerce.

ICANN

I want to mention one more topic that is very important to broadband Internet traffic. The global domain name system - the system that translates names into Internet addresses in order to enable communications to reach the desired destination - is receiving increasing attention in Internet circles. Why is NTIA interested?

Well, the Internet has permeated our lives both socially and economically - it has become an important means of doing research, communicating with each other, and conducting business. Given the Internet's importance in all of these facets of daily life and general global economic well-being, it is essential that the Internet - and its underlying domain name management system - remains stable and secure. This is the primary concern of the Department of Commerce.

The Department, and particularly NTIA, serves as the steward of critical elements of the domain name system during the transition from U.S. government to private sector management. ICANN was formed by private sector interests in 1998 to bring more coordination and sustainability to the domain name management system, as the Internet grew into a large-scale global network. The Department entered into a Memorandum of Understanding with ICANN to carry out these functions. Recently, there have been calls for ICANN to review its mission, structure and processes for their efficacy and appropriateness in light of the needs of today's Internet. ICANN itself has initiated its own process of reform.

The Department believes these discussions are healthy and essential to ensuring the best path for stable and secure Internet management in the future. My goal is to ensure that ICANN reforms take place in a timely manner, are focused on core DNS management activities, and instill confidence and legitimacy in ICANN's operations.

ICANN has accomplished a great deal in its first few years of existence, yet all would agree that the road has been far from smooth. It is incumbent upon governments and private sector companies and users around the world to work towards establishing a mechanism for managing the Internet domain name system that is sustainable over the long term. The Internet is too important a resource for all of us to do otherwise.

CONCLUSION

In conclusion, high technology and advanced telecommunications, such as broadband, have the capacity to dramatically increase productivity and social welfare throughout the world. Private sector-led efforts, such as GBDe, help us to advance our thinking and expose us to new ideas and fresh perspectives on how to sustain and grow these technologies. I therefore encourage you to remain active, think creatively, and be outspoken. Your input will enable those of us in government to make more informed and better policy decisions. Further, your actions as innovators and users of e-commerce will lead the way to greater productivity and economic growth around the world.